Trump says framework reached for Greenland deal, cancels EU tariff threat

US President Donald Trump said Wednesday (January 21) he is dropping his threat to impose tariffs on several European countries, citing what he described as a new framework with NATO on Arctic security.

The abrupt about-face comes shortly after he told the World Economic Forum (WEF) in Davos that the US would not use force to pursue control of Greenland. Asked how long the deal will last, Trump was clear it's long term. “It's a deal that's forever,” he said. “It's what's called an infinite deal.”

In his earlier speech, Trump reaffirmed his ambition to secure “right, title and ownership” of Greenland and urged NATO allies not to stand in the way, warning that refusals would carry consequences for the alliance.

EU holds off ratifying trade deal

This came within hours of EU lawmakers agreeing to hold off ratifying a key trade deal with the US following Trump’s tariff threats over Greenland.

The parliament was planning a vote in the coming weeks on removing tariffs on US industrial goods as part of the agreement. A delay would not sink the deal, but it did send a strong message of discontent to the White House that EU lawmakers argued would unnerve American businesses.

“It is an extremely powerful lever—I don’t think companies would agree to give up the European market,” Valerie Hayer, president of the centrist Renew group, told journalists.

Trump had, however, played down the risk of a trade rupture with Europe, expressing confidence that the EU would continue investing in the US even if he moved ahead with new tariffs. “They need that agreement very badly with us. They really do, they fought very hard to get it. So I doubt that,” Bloomberg quoted Trump as saying on Tuesday.

70-minute WEF speech

Trump's address at the annual meeting of the elite in Switzerland tried to focus on his efforts to tame inflation and spur the economy back home. But his more than 70-minute address focused more on his gripes with other countries.

European Commission President Ursula von der Leyen on Tuesday called Trump's planned new tariffs on eight EU countries over Greenland a “mistake” and questioned Trump's trustworthiness.

French President Emmanuel Macron said the EU could retaliate by deploying one of its most powerful economic tools, known colloquially as a trade “bazooka.”

None of our business: Putin

Meanwhile, Russian President Vladimir Putin said he is not concerned about the Greenland issue. “What happens to Greenland is none of our business,” Putin said in his televised remarks at the national Security Council meeting late on Wednesday night.

“Incidentally, Denmark has always treated Greenland as a colony and has been quite harsh, if not cruel, towards it. But that's a different matter entirely, and I doubt anyone's interested in it right now. It certainly doesn't concern us. I think they'll sort it out among themselves,” Putin said, reminding that in 1917, Denmark had sold the Virgin Islands to the US.

Putin also recalled that in 1867, Russia had sold Alaska to the US for $7.2 million.

US stocks recover

The US stock market rebounded after Trump called off Greenland-related tariffs that he had threatened to impose on Europe.

The S&P 500 rallied 1.2 per cent Wednesday after Trump said he reached the framework of a deal about Greenland. The index recovered about half the ground it lost a day earlier. The Dow Jones Industrial Average also rose 1.2 per cent, as did the Nasdaq composite. Treasury yields eased in the bond market. They also got some help from a calming of government bond yields in Japan.

Europe relieved

Financial markets aren't the only ones breathing a sigh of relief after Trump rescinded his threat to impose new tariffs on European allies for their defence of Greenland and Danish sovereignty. A number of US officials had also been concerned about Trump's hardline stance and bellicose rhetoric toward Greenland, Denmark and other NATO allies because they feared it could harm other foreign policy goals.

These officials thought the fixation on Greenland and taking it at any cost was distracting from and complicating the president's effort to form the Board of Peace, which is supposed to be announced on Thursday in Davos, to oversee the Gaza ceasefire operation.

Indian markets likely to welcome move

On the sidelines of the WEF, Trump expressed confidence in the negotiation process with India, emphasising his personal relationship with Prime Minister Narendra Modi. His recent comments on a potential India-US trade deal have sparked optimism in the Indian equity markets, with investors awaiting further developments on the negotiation process.

Sensex and Nifty 50, the domestic stock market benchmark indices, are expected to open higher today following the cooling of tensions over Greenland. A potential India-EU trade deal is also likely to boost sentiments.

On Wednesday, the Indian stock markets saw high volatility. The Sensex fell 0.33 per cent to close at 81,909.63, while the Nifty 50 fell 0.3 per cent to close at 25,157.50.